Wednesday, June 21, 2006

With continuous economic growth averaging an astonishing annual rate of 10 percent over the past quarter century, China has transformed its landscape, become one of the largest economic powerhouses on earth, created development opportunities for its trading partners around the world and, in the process, generated huge demands for new sources of energy and other resources. Africa, on the other hand, has been left behind in the global quest for industrial modernization, economic prosperity and political stability. Yet, into Africa the Chinese are coming. They are coming for trade, investment and joint ventures, and they are consuming all the energy, minerals and other raw materials that the continent can offer.

An Evolution of Traditional Sino-African Ties

Africa's importance to China is reflected by Chinese Premier Wen Jiabao's ongoing tour of Africa. According to China's Ministry of Commerce, the seven countries on his itinerary—Egypt, Ghana, the Republic of Congo, Angola, South Africa, Tanzania and Uganda—have a combined trade volume of over US$20 billion with China, or 50.6 percent of total China-Africa trade last year. Only two months earlier, Chinese President Hu Jintao visited three other African states—Morocco, Nigeria and Kenya—following his trip to the United States and Saudi Arabia.

Such high-profile visits, a recurring practice over the past few years, have aroused speculation that Beijing's pursuit of great power status may include a new grand strategy regarding Africa. After all, top Chinese leaders have done the same extensive tours to Latin American countries since late 2004 when President Hu first visited Brazil, Argentina, Chile and Cuba. China's ties with African countries, however, can be traced back to the 1950s when newly emerging African states declared their independence. From the 1950s to 1970s, China developed close relations with many of these countries based primarily on shared ideological belief and political identity: anti-colonialism, national independence, economic self-reliance and Third World cooperation. Beijing provided substantial aid and other assistance to struggling African states in order to demonstrate that China was on the side of the Third World.

Things changed in the late 1970s. China's economic reforms gradually moved China away from its radical revolutionary worldview of the past. Beijing's open-door policy, primarily designed to attract foreign trade, investment and joint-venture opportunities from Western countries and to facilitate China's entry into the World Trade Organization, moved China much closer to a market economy where profits, not political agendas, drove most of the economic and trade activities. In this process, China's relations with African and other Third World countries have also evolved from anti-colonial brothers-in-arms to economic and trade partners based on market principles. Yet, many things have remained the same. Beijing continues to pay and train young African diplomats in the Chinese Foreign Ministry's prestigious Foreign Affairs University, a practice that has continued for many years; China continues to present itself as a member of the Third World; and since 1991, every Chinese foreign minister's first visit abroad each year has been to an African country. Beijing has even named 2006 the "Year of Africa," and it is getting ready to host a Sino-African summit toward the end of this year. Furthermore, according to Beijing's report to the People's Congress, most of China's foreign aid—totaling 7.5 billion yuan ($950 million) last year—has gone to more than 50 African countries. In fact, Wen claimed that China has offered Africa more than $44 billion in aid over the past 50 years to finance 900 infrastructure projects (AP, June 18). Meanwhile, all signs indicate that China-African relations are entering a new phase centered on energy and raw materials.

The New Focus on Energy

China's relentless pursuit of economic development turned the country into a net petroleum importer in 1993, and by the turn of the new century, its dependency on foreign oil had jumped to about 40 percent of its demand. Beijing's new target is to quadruple its economy again by 2020, as it did from the late 1970s to the mid-1990s. To achieve this goal, however, China must rely even more on external energy supplies as the Middle Kingdom already burns through 6.3 million barrels of oil a day. Although still far behind the United States, which consumes some 20 million barrels a day, the International Energy Bureau projects that Chinese consumption will reach a daily level of 10 million barrels within the next two decades or so.

Thus, China's quest for energy and other resources has brought China to Africa with urgency. Chinese customs statistics reveal that from 2001 to 2005, China's trade with Africa increased 268 percent, slower only than the growth of China's trade with the Middle East in the same period (367 percent), but faster than China's trade growth with Latin America (238 percent), ASEAN (170 percent), European Union (184 percent) and North America (163 percent). In the first quarter of 2006, the Ministry of Commerce reported that China's trade with the seven countries on Premier Wen's current African touring list amounted to $6.56 billion dollars, a surge of 168.2 percent. It is not surprising, therefore, that in such a broad economic context, Africa has turned into a major energy supplier to China in recent years. Back in 2003, both President Hu and Premier Wen visited several oil-producing African states with Chinese energy company executives, and since then China has become involved in an increasing number of energy deals on the continent that bear a number of unique characteristics.

Energy Security with Chinese Characteristics

First, Beijing is willing to get into the "troubled zones" with bold investment and aid packages in exchange for energy. When Angola ended its 27-year civil war in 2002, few foreign countries and firms were willing to invest in the country. China, on the other hand, committed a $3 billion oil-backed credit line to rebuild the country's shattered infrastructure. Beijing also made Angola its largest foreign aid destination. Now, Angola is the second largest oil producer after Nigeria in sub-Saharan Africa, producing 1.4 million barrels per day with one-third of its oil exports—13 percent of total Chinese imports—going to China. In the first four months of this year, Angola was also the largest supplier of crude to the Chinese market after Saudi Arabia (AFP, June 20). Similar arrangements have been made with Nigeria and other countries as well.

Second, Chinese energy companies are committing large amounts of funding and labor for exploration and development rights in resource-rich countries. Sudan is one of the earliest and largest overseas energy projects by China's major energy companies. Chinese operations in Sudan include investment, development, pipeline building and a large number of Chinese labor deployments. Today, China has $4 billion of investment in the country. The China National Petroleum Corp. (CNPC) has a 40 percent controlling stake in Greater Nile Petroleum that dominates Sudan's oilfields. Last year, China purchased more than half of Sudan's oil exports, and earlier this year, China National Offshore Oil Corp. (CNOOC) announced that it had bought a 45 percent stake in a Nigerian oil-and-gas field for $2.27 billion and also purchased 35 percent of an exploration license in the Niger Delta for $60 million. Chinese companies have made similar investments in Angola and other countries.

Third, Chinese energy companies enter into joint-ventures with national governments, state-controlled energy companies or individual enterprises in order to establish a long-term local presence. It appears that the Chinese companies are often willing to outbid their competitors in major contracts awarded by African governments because their concerns are not in short-term returns but rather in strategic positioning for the future.

Fourth, China does not take into consideration the particular concerns of the United States or other Western countries when selecting energy cooperation partners and has a different set of standards on how to advance political reform and human rights in Africa. Most notoriously, China has been willing to engage in energy deals with the Sudanese government despite the ongoing crisis in Darfur. Likewise, China has just reached an energy and mining deal worth $1.3 billion with Zimbabwe. In exchange for building three coal-fired thermal power stations, Zimbabwe is likely to repay the Chinese investment with its rich deposits of platinum, gold, coal nickel and diamonds (The Guardian, June 16).

A Model for Future Cooperation or a Return to the Past?

In the past few years, the demands from China and other developing economies for oil and natural gas have become the major factor, although not the only one, that has driven up world energy prices. Chinese energy companies' extensive activities in Africa, Latin America, the Middle East and Central Asia in search of oil and gas assets have created anxiety regarding the world's future supply of energy. Discussions of a new "great game"—a term traditionally associated with competition among major world powers for the control of Eurasian oil resources since the late nineteenth century—have become frequent among observers of energy security.

Today, Africa supplies China with nearly a third of its oil imports. Beijing's extensive engagement and its ascending status in Africa also raises important questions on the nature of China's involvement in the continent as well as Beijing's long-term objectives in the region. Critics charge that China has pursued mercantilist policies in the region for pure economic benefits without human rights or environmental concerns. Due to China's support, they argue, the Sudanese government has been able to continue its genocidal policy in the Darfur region, and the Mugabe regime has been able to survive and carry on its abuses of human rights in Zimbabwe.

Officially, Beijing rejects the criticism with two arguments. The first is China's trademark policy of non-interference in domestic affairs. As Premier Wen stated, "We believe that people in different regions and countries, including those in Africa, have their right and ability to handle their own issues" (South China Morning Post, June 19). The second is China's emphasis that its involvement in Africa is different from the colonialism of the past, and that an affluent China is now putting money back into the local African economy. As Chinese leaders like to say, it is a win-win situation.

With China speedily expanding its activities in Africa, international concerns over Chinese behavior are also deepening and calls for Beijing to be a more responsible world power are becoming stronger. There are also indications that Chinese policy makers, academics, NGOs and even enterprises are beginning to reflect upon China's role in Africa. Many African countries are benefiting from a "China boom," but they would be better served if Beijing were to take further steps in balancing between economic interests and the welfare of the African people. Only by doing so would China be able to demonstrate to the world that its arrival in Africa is indeed different from the old colonial powers.